Tanzania says Russia's ARMZ owes $206 mln in taxes

Reuters Staff

4 Min Read

* Mineral exports up 16 pct in 2012 to $2.3 bln

* Government to acquire 50 pct stake in tanzanite producer

DODOMA, May 23 (Reuters) - Tanzania is demanding almost $206 million in taxes from Russian state uranium company ARMZ which has won a licence to build the east African country's first uranium mine, the energy minister said on Thursday.

Tanzania's tax claim relates to the Mkuju River project in southern Tanzania, which is operated by Toronto-listed Uranium One but owned by ARMZ, the Canadian uranium producer's majority shareholder.

"The Mkuju project ...was sold in December 2010 to ARMZ of Russia after acquiring shares from the parent company, Mantra Resources of Australia," Energy and Minerals Minister Sospeter Muhongo said in a newspaper advertisement of his ministry's 2013/14 budget proposals, which were tabled in parliament on Wednesday.

"Following this deal ... the Tanzania Revenue Authority is claiming $205.80 million, of which $196 million was supposed to have been paid as capital gains tax and $9.8 million as stamp duty."

Muhongo said the company has disputed the tax claim and the matter was now awaiting a court ruling.

Gaudiosus Ishengoma, a lawyer at FB Attorneys which is representing ARMZ in the tax dispute, said the Russian company had successfully challenged the government's tax demands in court. He said the case was now before the Tax Appeals Tribunal of Tanzania.

Uranium One in 2011 revised upwards its mineral resource estimate for the Mkuju project to 119.4 million pounds of U3O8 (about 45,900 tonnes of uranium) from 101.4 million pounds previously.

The project was granted a mining licence by the Tanzanian government in April.

The minister also said the government planned to conclude a deal to buy a 50-percent stake in the Tanzanian unit of London-listed Richland Resources by July 30.

The AIM-listed miner, which holds the licence to the largest of four mining blocks in the world's only tanzanite-producing area near Mount Kilimanjaro, returned to profitability in 2010 after two years of losses.

Tanzania's Mining Act of 2010 stipulates that Tanzanians retain at least 50 percent control or shareholding in all gemstone mining operations.

TanzaniteOne said a state-run mining company, STAMICO, was not expected to pay cash but instead use part of the future dividends from mining operations to pay for the acquisition.

"The value of the 50 percent stake to be acquired by STAMICO shall be determined by a valuation that would be determined by an independent valuer," TanzaniteOne Chairman Ami Mpungwe told Reuters.

The minister also said the government would enter into a joint venture with Australian firm Manjaro Resources to revive an old gold mine in northwestern Tanzania, which has tailings worth an estimated $70 million.